Cocoa Prices Fall on West Africa Harvest, Weak Demand
Category: Cocoa
(Wall Street Journal) – Cocoa futures ended below $3,000 a ton for the first time since May on Monday amid the ramping up of the harvest in West Africa and weak demand in some regions.
The Cocoa Association of Asia reported a 5.9% drop in third-quarter grindings to 151,643 metric tons last week, even though the data included production from two new factories. Grindings are viewed as a proxy for chocolate demand.
Chocolate companies from Peru to Italy said this year that their growth has been driven by rising demand for their products in Asia, so a slowdown in demand there is particularly concerning to the market. Chocolate sales in India are expected to soar by 14% this year, according to Euromonitor. China is now the world’s eighth-largest chocolate consumer, up from 10th in 2010.
Third-quarter cocoa grindings in Europe, the world’s biggest per-capita chocolate consumer, fell 1.1% on the year to 327,866 metric tons, figures from the Brussels-based European Cocoa Association showed earlier this month. However, North America’s quarterly figure hit a record and beat market expectations.
Cocoa for delivery in December on the ICE Futures U.S. exchange ended down 2.6% at $2,970 a ton, the lowest level since May 20. It was the first time the most actively traded cocoa contract ended below the psychological level of $3,000 a ton in five months.
Prices have also been under pressure as the harvest continues in West Africa, the top cocoa-producing region, despite the spread of the Ebola virus in the area. Although Ebola hasn’t so far been detected in Ivory Coast or Ghana, the two countries that produce about 60% of the world’s cocoa, fears the deadly disease could spread sent prices for the key chocolate ingredient to a 3½-year high on futures markets late last month.
“With the harvest coming on, if we don’t see [Ebola in cocoa-growing countries, prices are] going to crash and that’s exactly what’s been happening,” said Jack Scoville, vice president at Price Futures Group in Chicago. He sees support emerging around $2,950 a ton.
In other markets, raw sugar for delivery in March ended at 16.03 cents a pound, down 2.1% on the day at the lowest settlement since Sept. 24, after voters in Brazil, the top exporter of the commodity, re-elected President Dilma Rousseff, which sent the country’s currency plunging.
The weaker real, which was on track to a near-decade low against the U.S. dollar on Monday afternoon, is encouraging exports of sugar from Brazil because producers receive more of their local currency back for their sweetener sold abroad in U.S. dollars.
Arabica coffee for delivery in December ended down 0.3% at $1.9090 a pound, the lowest settlement since Sept. 26. Orange juice for January delivery closed 1.9% lower at $1.3805 a pound. December-delivery cotton settled at 63.67 cents a pound, down 0.2% on the day.
